Pages

Tuesday, May 24, 2011

The nasdaq and russell 2000 are both looking to break important levels here in the Asian session. Nasdaq is headed to a strong support from previous lows around the 2285 mark while the russell is headed towards the psychologically important level of 800. There could be a good sized overnight move if these levels break here, and then look out below!

Copper on a daily basis has been in a well formed down trend for over a month now, forming well defined lower lows and lower highs. I also personally think its important to see a trend hold its retracements, and especially its confluence of retracements which we see in the daily chart with the 38.2% of the green and 50% of the purple retracement around 4.1127-4.1285. Looking even closer on the hourly chart over the last few days, we see a good test and hold of the 4.05-4.025 levels. There is also some continuation divergence in the RSI as highlighted by the yellow lines. I think this is a good play to the downside right where the market opens tonight and easily see this making new yearly lows within a week or so.

As an update to the Natural Gas post originally suggesting a long position after a nice engulfing pattern off of support, I bring you the two charts to our left. I suggested waiting for a move down to get in and there was at least one opportunity today (@4.276), the 38.2% retracement of the move from its lows to its highs today. On a daily chart it looks like it has cracked and closed right about the first retrace of the sell off in early may, and the hourly shows it testing the retracement downwards intra-day, only to sharply reject it and head back up. I entered today on that quick down move and believe this position is still healthy and look to take some off at the 61.8% (@4.482) and only stop out if we fall and close below 4.2.

The euro had a slight up day today after a couple swift down days previous. The daily chart looks like it might even be finding a base (@ 1.4) but looking at the hourly, you can see the multiple attempts to crack the 38.2% retrace (@1.4114) of the previous days down move. With this being said I really think we see a down move tomorrow that cracks the 1.4 level, and how we finish up tomorrow might determine if it will be a quick pop back over or a more permanent step in the trend. Shorting it here feels like a good move, taking some off at 1.4 just because and tightening a stop and hoping for the worst (or the best in my case) for this pair.

But enough about the fundamentals. Lets go to the important stuff, AKA the charts.

After crude crapped itself from 114+ down to 95 it found a nice little range here of about 5-10 dollars off those lows. There is a bonanza of support at 95: Channels, Fibbonacci retracements, previous important daily gaps, etc. However, it also has good resistance now from 100-105. As previously posted yesterday by Sandwich Heavy Investor here on DCB, we think crude is going to crack that 95 resistance and fall to 85-90 in the next few weeks.

(Note: I bought DTO (2x bear WTI Crude ETN) when the crude hit 100 (per yesterday's advice by Sandwich Heavy Investor in his WTI post). I still have it on.

The Nasdaq was the leader on the way down today (as it generally is). Technically speaking, it looks weak as all hell and has room to run.

We broke back into the old bearish channel (purple) on Monday. Today we rejected the recently broken bullish channel (cyan/ light blue) and highs of the purple channel, as well as the 50 (blue) and 100 (yellow) day VWAP. We also closed significantly under the 50% line from Japan March lows to May 2 high on decent volume.

The current purple channel is my cap to the upside now until proven wrong on a closing basis.

2280 is first support (fib) with 2256.25 (2007 high) being very strong support.

However, I see these eventually cracking and Nasdaq getting to the midpoint of the purple channel sooner rather than later.

(Note: I bought SOXS (3x bear semiconductors ETF) when the Nasdaq popped into that resistance cluster. I normally book those trades same day for a minimal profit. However, I am holding this one for a few days or another good push down.)

SnP was far stronger than the Nasdaq all day and at one point was up on the day when the Nas was down 10+... It is the only index still supported by its 50% from Japan lows to May 2 highs and its 100 day VWAP (yellow). I see the current bearish channel (magenta) as the driver and it will not be able to break out of this to the upside in the near term.

The Fibonacci cluster just south of 1300 as well as the low of the current bullish channel (yellow) will prove to be very strong resistance and will almost certainly produce an initial bounce.

Overall, I am slightly bearish, the least bearish of all the indicees I look at.

After a night session that saw most equity futures positive, and then most going in the red during the US session, they have been slowly retreating back to yesterdays settle. If you are a believer in these continuing down with no large daily retrace, it seems this would be as good an opportunity as ever to get in. The russell 2000 future is about to hit the bottom level (@811.8) of the most recent down move's retracement, which coincides with the support from yesterday. This area might be what needs to be broken if we are to see a delay in what I feel is an eventual move lower, and I think its a good spot to take a small shot in case these take off overnight.

It looks like Walter Energy (WLT) is gearing up for a bullish run as it signals with a hammer candlestick on slightly better volume than average yesterday. It formed this off the 38% retracement (@ 110.72) and the previous low peaks (2/23, 3/15). We also see a slight continuation divergence in the MACD. All these really line up for a low risk buy opportunity, where you know if it closes below the green and purple support lines you shouldn't be in anymore, but otherwise lots of room to the upside. So from these levels it looks to be more or less a 2:1 reward-to-risk ratio, good enough for me.

It looks like the Euro formed some nice hammers against both the CHF and the JPY during yesterdays session, which might be a good indication that it can maybe pick up a little strength against one or both. The EUR/JPY looks like an excellent spot to think about buying at these levels as it tested its deep retracement and now has support off the 50% retracement (@114.96). It also shows some continuation divergence with the MACD and appears ready to continue its previous uptrend.

2320 is very important. On the daily, it is the intersection of the 50 (blue) and 100 (yellow) day VWAPs, as well as the most recent bearish and bullish channels. As long as we don't put in new highs for the day (currently 2324.25 on the JUN future), I am quite bearish the Nasdaq, with a target near 2245

Corn has been in an uptrend for quite a while but it looks like it might be pulling back one more time here before it heads to new yearly highs. It reached a peak yesterday around the 776 mark, with yearly highs at 783.75. It looks like this will be a pullback before the charge forward, possibly even a short term play to the downside. But expect a hard test as it approaches the 717-715 level where we see confluence of two fib retracements. The long term play would be to look for a signal around this area to get in long and ride this to new highs.

Should this hour bar close under 1.41 and complete it's shooting star pattern off of the shallow fib at 1.41+, I think it could be a good low risk sell, with a target of 1.3980. Stop if Euro trades above 1.4115. (See previous Euro post for my more long term view)

The following 60 min chart (zoomed and normal) shows that crude has gotten to the top of it's bearish channel (magenta). There is also a confluence of fib levels at this point as well (99.30). Per my last crude post, I would close half of the long here, and drag the stop to breakeven. Target of 101.45 for the rest. 101.50-102.50 should provide significant resistance to this rally. Personally I would sell it. (See previous posts on long term bearish crude thoughts).

It looks like the 1535-1545 level will provide good resistance to this recent rally. I thought the bullish channel break to the downside on May 17 was confirmation of May 2nd being the near term high. With us back in the channel now and above the bearish one (magenta) I think we get to 1525-1545. From there I think if we get higher, we make new yearly highs. If it stalls, I think 1500 or just above becomes the key support yet again.